CALGARY, ALBERTA--(Marketwire - April 9, 2012) - GASFRAC Energy Services Inc. (TSX:GFS.TO - News) ("GASFRAC") announced today that revenues and profit before income taxes for the first quarter of 2012 are expected to be lower than for the fourth quarter of 2011.
While revenues are expected to be approximately 50% better than the first quarter of 2011, in comparison to the fourth quarter of 2011 they are expected to decline by approximately 25%. This decrease reflects two events: 1) an early spring break- up in Canada and 2) low activity in the USA where several clients who completed trials during the fourth quarter of 2011 continue to assess production results over several months to determine not only initial production results but also calculate decline curves. This combination of events has resulted in lower utilization rates and corresponding EBITDA(i) margins.
Zeke Zeringue, Chief Executive Officer commented "While I am disappointed with first quarter results, our main focus remains that of increasing the utilization on our entire fleet of fracturing sets through the adoption of our game changing technology. We have seen several positive events during the quarter indicating that this adoption continues to take place.
Since November GASFRAC has achieved several key strategic objectives that will better position us for growth for the remainder of 2012 and beyond. We signed our first long term Technology Solutions Agreement in the US and are working toward implementing several more similar arrangements this year. We have also entered into a Memorandum of Understanding ("MOU") with eCorp International to jointly pursue the Western European stimulation market. Subsequent to entering the MOU, ECorp International and the Tioga County Landowners Group announced an agreement to develop (up to 135,000 acres) of Marcellus and Utica in Tioga County, New York. GASFRAC was identified as the provider of the LPG technology and we anticipate that we will enter into an agreement to provide our technology.
Our recent North American business development, marketing, and sales efforts have generated a backlog of more than forty companies that have requested proposals or high level presentations and we anticipate that these leads will develop into increased revenues in the second and third quarters.
As previously mentioned, we signed a two year Technology Services Agreement with BlackBrush Oil and Gas, L.P. in late February and commenced work under the contract in early March. Further, we have scheduled work with a midsize operator with an extensive position in the Eagle Ford for early third quarter who plans to compare the results to offset wells treated in that area using water fracturing.
In the Permian basin we have utilized our technology team to complete a detailed reservoir review to identify a new approach to unlocking reserves in the Wolfberry trend. This effort has been in partnership with an operator who has a large acreage position in the Wolfberry trend.
Based on the successful Niobrara Shale campaign in the 4th Quarter 2011, we will be recommencing work with Quicksilver Resources Inc. and other offset operators this summer after the seasonal wildlife bans have been lifted.
In the Ohio Utica play, a major independent has requested that we perform a two well trial in an area we are confident will benefit from the GASFRAC technology.
Husky continues to be active in its Cardium development and we are targeting additional customers in the Cardium based on the positive production results being experienced. We are also targeting the Viking and Montney formations for additional opportunities.
As with any new technology that is strategic to customers' core assets, the adoption is driven by the demonstration of value (e.g. production improvement) and understanding of that value by both operations and business executives. Our focus continues to be that of accelerating the adoption of our technology and increasing utilization through; 1) focus on selected liquid rich basins, 2) collecting ever more data that clearly demonstrates the positive impact of the GASFRAC technology on production and returns for our customers, and 3) executive sales/education - I have visited with senior executives at numerous customers and potential customers at in both Canada and the US and continue to do so.
It is my expectation that revenues from US operations will grow in the second quarter as customers complete evaluation of trials and additional customers are introduced to GASFRAC. Also, it is expected that some of the Canadian spring break-up impact will be lessened by pad work at Husky and a reduced length of break-up during the second quarter of 2012 as compared to the extensive break-up of Q2 2011. As we have experienced in both 2010 and 2011 I expect that our business development efforts and the pace of adoption will result in revenues for the second half of the year representing 65% to 70% of annual revenues."
GASFRAC is an oil and gas technology and service company headquartered in Calgary, Alberta, Canada, and the sole provider of waterless gelled LPG fracturing technology in North America.
a. EBITDA is a non-IFRS measure defined as net income before interest
income and expense, taxes, depreciation, amortization and non-
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GASFRAC Energy Services Inc.
Chief Financial Officer